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Is the furusato nozei hometown tax donation system’s original purpose — regional promotion by making donations to a donor’s hometown or municipalities to which they have connections — being disregarded? The government needs to review problems with the system.
When people make furusato nozei donations, they generally use portal sites that show thank-you gifts from local governments. It is convenient for donors to use such sites as they can search for thank-you gifts they favor. Local governments also have the advantage of being able to collect donations more efficiently.
To attract users, major furusato nozei sites, such as Satofull and Furunavi, offer points that donors can use for shopping or exchanging goods according to the amount of their donations.
In response, the Internal Affairs and Communications Ministry has decided to ban from October next year the use of companies that offer such reward points. This is because local governments currently pay commissions to the operators of such intermediate sites, and some of the commissions may possibly be used to fund reward points.
The companies offer reward points apparently with an aim of attracting users and receiving more commissions from local governments, but these points have nothing to do with the furusato nozei system. If the points are funded by donations that are supposed to go to the local governments, this is a problem.
It is only natural that the ministry has moved to correct excessive competition over services offered on these sites. It is important to encourage the companies to lower commissions and take other steps, so that the local governments can receive a sufficient amount of revenues in accordance with the size of donations.
The furusato nozei system is structured so that when people donate to local governments, the amount of their donations minus ¥2,000 is deducted from their residential and other taxes.
Since the system was launched in 2008, the amount of donations received via the system has continued to rise due to the popularity of the thank-you gifts from local governments. In fiscal 2022, the total amount of furusato nozei donations reached nearly ¥1 trillion, with about 9 million people using the system annually.
However, various adverse effects have emerged as the use of the system has become widespread.
In the past, some local governments offered expensive consumer electronics and other items, causing the competition for thank-you gifts to heat up. Given the situation, a rule was introduced to limit thank-you gifts to local products worth 30% or less of the donation amount.
Then, recently, there has been a spate of irregularities in which companies contracted by local governments to handle thank-you gifts disguise the place of origin of meat and fish. Some municipalities also do not follow regulations concerning thank-you gifts.
There has also been a continuing tendency for donations to be skewed toward municipalities offering famous products in return, such as brand-name beef and crab. Municipalities in urban areas that do not have well-known specialties have been plagued by an outflow of tax revenues to other municipalities.
It is crucial that these problems be resolved one by one, and that both donors and local governments use or operate the system with moderation.
